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Amid stiff resistance followed by walk out by the Congress Members, the Lok Sabha today, on May 6, 2015 has passed the much awaited Constitutional (122nd Amendment) Bill, 2014 on Goods and Services Tax (“GST”) with 2/3rd majority.

The Hon’ble Finance Minister, Mr Arun Jaitley, has indeed been working hard for the smooth passage of the GST Constitutional Amendment Bill tabled in the last session of the Parliament in December, 2014 [calling it the “Single biggest tax reform since Independence”], but he was taken aback by the sudden vociferous stand coupled with aggressive and brisk walk-out from the House by the main Opposition Party.

As the Lok Sabha took up discussion on the GST Constitutional Amendment Bill on Tuesday, Finance Minister Mr. Arun Jaitley ‘requested’ the Opposition to help clear the Bill and not to insist on sending it to the Standing Committee, otherwise the planned roll out of GST from April 1, 2016 will be delayed by another fiscal.

Meanwhile, Mr. Arun Jaitley said that GST will reduce prices in the long run and will boost economic growth. He further added that the Central and State Governments are not interested in imposing higher GST rates that could hurt people.

"I don't forsee any state losing revenue after roll out of GST," Mr. Arun Jaitley added.

The GST Constitutional Amendment Bill paves the way for a pan-India Tax regime and a unified market across the Country, ending the multiplicity of Central and State Taxes. Because it seeks to amend the Constitutional, it needs two-thirds of both houses to vote in its favour.

Now, after being passed in the Lok Sabha, the GST Constitutional Amendment Bill requires to be passed with 2/3rd majority in the Rajya Sabha as well followed by its ratification by at least 50% of the States before it becomes law of the land.

In the Rajya Sabha, where the ruling BJP is in a minority, the Congress has said it will insist on sending the Bill to a Parliamentary committee for review. Thus, the GST Constitutional Amendment Bill is likely to face stiff opposition at the Rajya Sabha and may be routed to the Standing Committee.

Following are the salient features of the GST Constitutional Amendment Bill:

At the State level, Taxes like VAT/ Sales Tax, Central Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury Tax, etc. would be subsumed in GST.

The Centre will compensate States for loss of revenue arising on account of implementation of the GST for a period up to five years (The compensation will be on a tapering basis, i.e., 100% for first three years, 75% in the fourth year and 50% in the fifth year).

All Goods and services, except alcoholic liquor for human consumption, will be brought under the purview of GST. However, it has also been provided that petroleum and petroleum products shall not be subject to the levy of GST till notified at a future date on the recommendation of the GST Council. The present taxes levied by the States and the Centre on petroleum and petroleum products, i.e., Sales Tax/VAT, CST and Excise duty only, will continue to be levied in the interim period.

Both Centre and States will simultaneously levy GST across the value chain. The Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect theState Goods and Services Tax (SGST) on all transactions within a State.

The Centre would levy and collect the Integrated Goods and Services Tax (IGST)on all inter-State supply of Goods and Services. There will be seamless flow of input tax credit from one State to another. Proceeds of IGST will be apportioned among the States.

GST is a destination-based tax. All SGST on the final product will ordinarily accrue to the consuming State.

GST rates will be uniform across the Country. However, to give some fiscal autonomy to the Centre and States, there will a provision of a narrow tax band over and above the floor rates of CGST and SGST.

It is proposed to levy a non-vatable Additional Tax of not more than 1% on supply of goods in the course of inter-State trade or commerce for a period not exceeding 2 years, or further such period as recommended by the GST Council. This Additional Tax on supply of goods shall be assigned to the States from where such supplies originate.

The term "Services" is proposed to be exhaustively defined as "anything other than goods".

Insertion of new Article 246A conferring simultaneous power to the Union and the State legislatures to legislate on GST.

Insertion of new Article 279A for the creation of a Goods & Services Tax Council, which will be a joint forum of the Centre and the States. This Council would function under the Chairmanship of the Union Finance Minister.

To do away with the concept of ‘declared goods of special importance’ under the Constitutional

As an endeavour to give clarity on GST, its constitution and implementation, CA. Bimal Jain has recorded three videos on GST. The videos touch the issues pertaining to present Indirect Tax systems and suggests how the GST can be a Good and Simplified Tax System.

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